InvestorQ : How did DCB Bank perform in the Q3 quarter?
Deepa Salunkhe made post

How did DCB Bank perform in the Q3 quarter?

Arya Nanda answered.
1 year ago

DCB Bank reported good growth but a sharp spike in loan loss provisions impacted the net profits substantially. The bank reported a marginal 3.33% growth in revenues for the Dec-20 quarter at Rs.1,024 crore. While treasury income was higher, interest income from retail lending business and the corporate lending business saw a sharp fall.

The good news was that the operating profits were up 46.03% at Rs.277 crore. This was largely on account of lower interest costs and also due to lower operating expenses in the quarter. As a result of this combination, the operating margin or OPM expanded from 19.17% in Dec-19 to 27.09% in Dec-20 quarter. That is a sharp growth in OPM for a bank.

The bottom line is what took a hit. Profit after tax for the Dec-20 quarter was totally flat at Rs.96 crore. The reason was a sharp increase in loan loss provisions made in the quarter which went up from Rs.59 crore to Rs.148 crore on a yoy basis. As a result, the PAT margins moderated to a small extent from 9.76% to 9.40% on the back of a larger revenue base.

It must be noted that the overall financial strength parameters of DCB Bank are durable. DCB Bank saw a sharp fall in gross NPAs to 1.96% and net NPAs fell to 0.59% indicating most medium term risks provided for. That is the good news on the asset quality front.

In addition, DCB Bank also has a comfortable capital adequacy ratio of over 18% which is well above the statutory minimum. From the perspective of a private sector bank, the return on assets or ROA is above 1% which is a signal of inherent strength.